Affordable For All: The Challenge For New U.S. Housing Secretary

a small section of a public housing building in Singapore is a study in white contrasted with bright yellow
public housing photo by GT#2...thanks for millionth support is licensed under CC MARK 1.0
A glimpse of Singapore's wildly successful public housing. Can the United States end its obsession with public housing failures and renew a quest for success?

Recently, we posted a story1 that assessed the chances that Public Housing would see a revival in America under a Biden administration.

An article from Cleveland further supports our assessment that it won’t happen any time soon.

The article’s author, Leila Atassi, celebrates Cleveland’s role as a pioneer in the construction of public housing in America. But that was yesterday.

Today, Atassi reports, more than three-quarters of a century later, the public housing is tired, in the wrong place, and crime ridden. All those years of usefulness later, it has somehow finally proven to be irredeemably unworthy of repair and/or refurbishment.

Quite why it’s destined for the scrap heap, even though each of its individual problems could be addressed, is down to the political philosophy of the nation’s political centre, moderate Republican and moderate Democrat alike. That is: look to the private sector to provide truly affordable housing, not the public sector.

And so Cleveland waits and hopes for a solution that will never arrive. The supposed saviour promises to be a Biden-certified housing voucher solution.

Atassi is calling for a voucher program that requires landlords in every state to accept tenants with a voucher. The voucher program would also be open to everyone who qualifies to receive financial assistance with which to pay for their housing. Currently, only about one in four families or individuals who qualify for them actually receive them. Together, these measures could open up supply to a much larger number of units in the private market to a much larger number of renters across a much larger geography.

Requiring landlords to accept tenants with vouchers would mean tenants would have access to more housing in more neighbourhoods. More vouchers would provide immediate relief to the hundreds of thousands of tenants across the US who are paying more than 30% of their incomes on rent.

These changes would assist households headed by women, single parent households and members of visible minorities, who are over represented in the group of people with very low incomes.2

Atassi’s proposal should achieve immediate relief for tenants, which is one reason for using housing vouchers (also called rent supplements). With more than half of all renters in the US rent burdened, and 25% severely rent burdened (paying more than 50% of their income on rent), this is a program that will help immediately where it is needed most. You can read more about her ideas at cleveland.com: Federal housing vouchers for all who need them could be Marcia Fudge’s legacy as HUD secretary

Currently, the program Atassi describes is an affordable housing fix proposed by the incoming Biden Administration. The question is, can universal access to, and universal acceptance of, housing vouchers be a long term silver bullet solution for those low and no income citizens who need financial help to stay housed?

The big stumbling block for a the longer term is the free market that determines rents. On their own, tenants with very low incomes have a limited ability to influence rents in the private rental market. Even the gains they make with more vouchers could be lost quickly.

For example, a landlord can get around an obligation to accept a voucher by raising the asking rent for a unit to a price that is beyond the financial reach of a prospective tenant with a voucher. This can happen as a result of a hot rental market. Such a market occurred after the 2008 housing crisis, as homeowners lost their homes and were forced into the rental market. The same pressures on the rental market can occur, and are occurring, in different places.3

And, assuming a tenant is able to move to a new home in an area of their choice, what happens in a government vouchers-for-all program when the rent goes up? Will the subsidy rise automatically to cover the cost? Decision makers will have to consider how to manage the cost of the program. A solution like limiting the number of vouchers, which has been HUD’s principal tool to manage its costs, immediately causes this Biden proposal to fail.

The only effective long term solutions that do not expose government subsidies to continuously mounting increases are those that manipulate the free market. Rent controls and adding to the supply of non-market housing, such as public housing, are two examples of solutions.

And so we wind up back where we started, with the current HUD policies pursued by Republican and Democrat administrations alike over the last few decades — reluctance to interfere with the workings of the free market on one hand by imposing rent controls, and abandonment of government-managed public housing removed from the free market on the other.

As we proposed at the beginning of this post, these kinds of solutions seem unlikely to happen any time soon.

Footnotes

  1. Try: Biden-Harris: Timely Dawn Of A New Day For Public Housing? Unlikely
  2. And in these days of pandemic, such a program would also benefit landlords who need a revenue stream to pay for their investment. Some landlords are large businesses with deep pockets, but there are the small scale investors who may be even more motivated to accept tenants with vouchers than usual.
  3. Consider this Irish experience: Housing Rental Assistance Stalls Out In Hot Markets. Even Warm Ones.

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